With a weak data calendar yesterday and mixed stock markets the currency arena was a bit of a hotchpotch yesterday with a lot of positioning ahead of key announcements from 2 central banks today.

Primarily it is the Fed meeting today at 19.15 that most commentators are focusing on. Much like last week’s Bank of England announcement we do not foresee any change on the monetary policy side of things I.e. Interest rates will stay in that band of 0% -- 0.25%. However, like the BOE also, their QE plan is due to end soon and instead investors and speculators alike are focusing on whether they pull out or pull a rabbit out of a hat and extend. We think the rabbit will stay home today and they don’t extend: impact to currency markets will be a stronger dollar.

The other key piece of data today is the Bank of England Inflation report. This acts as a significant risk to GBP should the main theme to the meeting be of ‘uncertainty’. With the expansion of QE on Thursday the market will be wanting to question the men at the top as to their motives; should it be due to something lurking around the corner then expect GBP to get crushed. Just to give an example of the impact of this report the FTSE lost nearly 3% and sterling around 0.75%, similar could be expected today.

Other factors to be aware of today include UK unemployment at 09.30 which is expected to show the jobless rate has risen to 7.7% with an increase of 25000 over the past month, European Industrial Production (10.00) and US Trade Balance (13.30)